What is spread in Forex? The spread is the gap between the Ask price you buy at and the Bid price you sell at, on any currency pair or trading instrument. It is one of the direct costs you pay every single time you open a position.
The wider the spread, the further price has to travel in your favour before the trade turns profitable. That is why understanding the forex spread — how it is calculated, why it widens, and how to compare it between brokers — is groundwork every new trader should cover before going live.
This guide from Backcom.io covers the Bid/Ask definition, how to convert spread into pips and into USD per lot, the difference between Fixed and Variable spread, why spreads widen, and how to check a broker’s real spread before you deposit.
What Is Spread in Forex? Definition and Why It Matters
The forex spread is a direct component of your trading cost. The moment you open a position you are almost always sitting on a small unrealised loss — exactly the size of the gap between the buy price and the sell price.
Spread = Ask price – Bid price
The forex spread is usually measured in pips, but for gold, indices or CFDs you also need to check each broker’s quoting convention and contract specification. If CFDs are new to you, start with what CFD trading is.
Spread Is the Gap Between the Bid and Ask Price
On MT4, MT5 or a broker app, every instrument carries two prices: Bid is what you can sell at, Ask is what you can buy at. Ask is always the higher of the two, and the distance between them is the spread.
Take EUR/USD quoted at Bid 1.08420 / Ask 1.08432:
1.08432 – 1.08420 = 0.00012 = 1.2 pips
Buy EUR/USD and the order fills at the Ask. Close it immediately, before the market has moved, and it closes at the Bid — so you absorb exactly that gap. This is why a freshly opened position already shows a negative P/L.
The concept is not unique to Forex. The US Securities and Exchange Commission defines the bid-ask spread as the difference between the highest price a buyer will pay and the lowest price a seller will accept.
Why the Forex Spread Exists — How Brokers Earn
Broker revenue comes from the spread, from commission, from a markup added on top of the raw spread, or from other fees depending on the account model. But not all of the spread is broker profit — cost structures generally split two ways:
- Standard accounts: wider spread, usually no separate commission.
- Raw/ECN accounts: spread closer to the underlying market, but commission charged per lot.
- The rest comes down to liquidity provider pricing and prevailing market conditions.
All-in cost = Spread + Commission + Swap + Slippage and related charges
A “spread from 0.0 pips” banner tells you almost nothing about which account is actually cheaper. To compare against real numbers, see our roundup of the top low-spread Forex brokers and how to optimise trading costs.
How Forex Spread Differs From Stocks and Futures
The same Bid – Ask concept appears in three markets, but it is formed differently in each:
| Criterion | Retail Forex | Equities | Futures |
|---|---|---|---|
| Where it trades | Mostly OTC | Exchange | Centralised exchange |
| Quote source | Broker/dealer supplied | Buy and sell order book | Order book supply and demand |
| Broker markup | Possible | No | No |
| Unit of measure | Pip | Price unit | Tick |
| Brokerage fee | Depends on account type | Charged separately | Published separately |
The common rule: the deeper the liquidity, the tighter the Bid/Ask gap.
That is precisely why major pairs carry the lowest spreads: according to the Bank for International Settlements survey, global OTC foreign exchange turnover runs into trillions of dollars a day and is overwhelmingly concentrated in a handful of pairs. The CFTC also warns that retail OTC Forex behaves differently from exchange-listed products, so research the broker before depositing.
How to Calculate Forex Spread
Knowing what spread in Forex means is not enough — you need to convert it into pips and then into money to see what each trade really costs.
The Forex Spread Pip Formula
- For most Forex pairs: 1 pip = 0.0001.
- For JPY pairs: 1 pip = 0.01.
- The final decimal on a 5-digit quote is a pipette, worth 0.1 pip.
New traders need to keep pips and points apart, because MT4 and MT5 display them differently — see the differences between MT4 and MT5.
Worked Examples With EUR/USD and XAU/USD
EUR/USD — quoted Bid 1.08420 / Ask 1.08432, a spread of 1.2 pips. Trading 1 standard lot where 1 pip is worth roughly 10 USD:
Spread cost ≈ 1.2 × 10 = 12 USD
XAU/USD — quoted Bid 2,385.20 / Ask 2,385.40, a spread of 0.20 USD. If the broker defines 1 gold lot as 100 ounces:
Spread cost ≈ 0.20 × 100 = 20 USD per lot
Lot conventions and the pip/point naming for XAU/USD vary between brokers. Before calculating anything, open the Specification panel in MT4/MT5 and check Contract Size, Tick Size, Tick Value and the number of quote digits.
Converting Forex Spread Into USD per Lot
A standard Forex lot is 100,000 units of the base currency. On EUR/USD, 1 pip on 1 lot is roughly 10 USD:
| Spread | Cost on 1 lot of EUR/USD |
|---|---|
| 0.2 pips | 2 USD |
| 0.5 pips | 5 USD |
| 1 pip | 10 USD |
| 1.5 pips | 15 USD |
| 2 pips | 20 USD |
Small numbers that compound fast. A scalper trading 10 lots a day at an average 1 pip spread pays 100 USD per day — about 2,000 USD across 20 trading days. That is why the forex spread matters most to scalpers, day traders, high-frequency EAs and high-volume accounts.
This is also the cost that can be partly recovered through the Backcom.io Forex rebate programme, or worked through step by step in what a Forex rebate is and how it is calculated per lot.
The Main Types of Forex Spread
Now that what spread in Forex means is clear, the next step is telling the two main types apart — Fixed and Variable — plus the “spread from 0 pips” accounts many brokers advertise.
Fixed Spread
A Fixed Spread is a forex spread the broker holds relatively constant under defined conditions — EUR/USD sitting around 1.5 pips, for instance.
- Upside: easy to price a trade before entering; suits traders who want a predictable cost structure.
- Downside: higher than the floor of a variable account, rare on Raw/ECN models, and still subject to exception clauses when volatility spikes.
Read the broker’s terms carefully: “fixed” does not mean the spread holds in every market condition.
Variable Spread
A Variable Spread is a forex spread that moves continuously with market conditions. The same EUR/USD might show 0.3 pips when liquidity is excellent, 0.6 pips through the London session, then jump to 2–5 pips or more on a major release.
It responds to liquidity, volatility, the trading session, economic news and the broker’s liquidity providers. The upside is a very tight spread in normal conditions; the downside is that cost becomes unpredictable exactly when the market gets busy.
Zero Spread — When It Is Real and When It Is Marketing
“Spread from 0.0 pips” can be genuine on certain accounts and instruments. The catch is the word from.
Zero spread does not mean free trading.
Before believing the headline number, check four things:
- What percentage of the time is the spread actually at 0 pips?
- Is there a commission per lot?
- Does it apply only to EUR/USD, or across instruments?
- What is the real average spread?
Run the numbers: a Zero account at 0.0 pips but 7 USD/lot round-turn commission costs 7 USD per lot. A Standard account at 0.8 pips with no commission costs about 8 USD per lot. A one-dollar difference — a long way from “free”.
How each account type applies spread and commission is broken down in Exness trading fees and in the head-to-head Exness vs other brokers comparison.
What Is Spread Widening and When Does It Happen?
Forex spread widening is when the Bid – Ask gap stretches abnormally far beyond its usual level. It matters enormously to Forex and gold traders because it raises cost, can trigger a Stop Loss, and fills orders on worse terms.
EUR/USD normally sits at 0.8 pips, but on a Nonfarm release it can run 0.8 → 3 → 6 pips within seconds. If you are holding a Buy, the Bid drops relative to the Ask even though the mid price has barely moved, which brings:
- A sudden jump in floating loss.
- A Stop Loss that may be triggered.
- Higher cost to both open and close, with slippage on top.
New traders watch the chart and ignore Bid/Ask, so they conclude the broker is “hunting stops” when the real cause is usually thinning liquidity and a widening spread. If you still suspect the broker, check it against the signs of a Forex broker scam before drawing conclusions.
5 Main Causes of Spread Widening
- Thin liquidity: fewer buyers and sellers means the best Bid and best Ask drift apart. Common late in the New York session, at rollover, at the start of the week and around public holidays.
- Major economic news: Nonfarm Payrolls, CPI, FOMC, rate decisions and PCE send quotes churning within seconds.
- Volatility spikes: financial crises, surprise central bank remarks or geopolitical events all drain liquidity.
- Price gaps: the market reopens far from the previous close and liquidity providers widen spreads to price the added risk.
- Broker model: each broker sources quotes differently, adds its own markup, aggregates prices its own way and runs its own risk policy.
5 Factors That Affect Your Forex Spread
With the definition settled, the rest is knowing what your own spread depends on. These five factors decide the number you see on the quote board.
1. Currency Pair (Major, Minor, Exotic)
- Majors (EUR/USD, USD/JPY, GBP/USD): deepest liquidity, so the tightest spreads.
- Minors (EUR/GBP, GBP/JPY, EUR/JPY): typically wider than majors.
- Exotics (USD/TRY, USD/ZAR, USD/MXN): thin liquidity and considerably wider spreads.
2. Trading Session (London, New York, Asia)
The London session carries deep liquidity from European banks and institutions. New York is strongest where it overlaps with London — usually the tightest spreads of the day. The Asian session works well for AUD/JPY and USD/JPY, but many EUR and GBP pairs are noticeably quieter.
The practical takeaway is timing. If your strategy is cost-sensitive, placing the same trade during the London–New York overlap rather than late in the Asian session can be the difference between paying 0.6 and 1.5 pips on an identical position — before you have changed anything else about the setup.
3. Major News Releases (NFP, CPI, FOMC)
Three release groups deserve special attention: NFP (US labour market), CPI (US inflation) and FOMC (Fed policy decisions). The FOMC calendar is published a year ahead on the Federal Reserve’s own site, so these are entirely avoidable if you choose to.
A 1 pip spread in normal conditions says nothing about the spread at the moment NFP prints.
Beginners should stay out of the market in the seconds either side of a major release until they are comfortable handling spread widening, slippage and requotes.
4. Account Type (Standard, ECN, Pro)
| Account type | Spread | Commission | Suits |
|---|---|---|---|
| Standard | Wider | Usually none | Beginners |
| Pro | Tighter than Standard | Broker dependent | Regular traders |
| Raw/ECN | Very tight | Yes | Scalpers, EAs |
| Zero | Can start at 0 | Usually yes | High volume |
Always add Spread + Commission rather than assuming an ECN account beats a Standard one by default. For a concrete broker-side breakdown, compare XM account types side by side.
The crossover point depends entirely on your volume. Below roughly a lot per day the difference between these account types is usually trivial; above that, the commission structure starts to dominate the forex spread itself, and it is worth modelling both on your actual monthly turnover before switching.
5. The Broker Itself
Two brokers quoting the same EUR/USD can still differ on spread, because of liquidity sources, markup levels, account type, execution technology and simply when the spread was measured.
So “which broker has the lowest spread?” is the wrong question on its own. Weigh average spread, commission, how far the spread widens on news, slippage, execution speed, swap and the broker’s regulatory standing together. A tight spread with poor execution is not the cheaper account.
Broker-by-broker rebate rates are listed in the Forex rebate comparison table.
Conclusion
What is spread in Forex? The gap between Ask and Bid, and one of the direct costs charged on every trade you place. The points worth keeping:
- Forex spread = Ask – Bid, measured in pips; majors are tighter than exotics.
- Variable spreads track liquidity, and widening tends to hit on major news or in thin markets.
- Zero spread is not free trading — add the commission to get the real cost.
If you scalp or trade size, a very small difference in forex spread becomes a significant cost over time. Beyond picking the right account type, you can recover part of it through the Backcom.io rebate programme, which returns a share of the spread or commission your trading generates.
Note: A rebate only reduces part of your trading cost. It does not reduce market risk and does not guarantee a profit.
Frequently Asked Questions
Is a Low Spread Always Better? How Many Pips Is Acceptable?
A low forex spread cuts cost, particularly for scalpers and high-volume traders, but there is no universal “good” number. Any comparison has to be same pair, same moment, same account type and same commission structure. EUR/USD under 1–1.5 pips on a Standard account in good liquidity is competitive, though not a fixed benchmark.
Why Is the XAU/USD Spread Wider Than EUR/USD?
EUR/USD is the most liquid pair on the market. XAU/USD moves harder, each move is worth more, it is sensitive to the USD and to bond yields, and it widens sharply around CPI, NFP and FOMC.
Fixed or Variable Spread — Which Should I Choose?
Fixed suits traders who want predictable costs and trade infrequently. Variable suits those trading in deep-liquidity hours, scalping, chasing tight spreads and willing to accept widening during volatility. Check commission and execution terms before deciding either way.
No. The spread is visible directly in the Bid – Ask difference, so it is not truly hidden. New traders simply tend not to notice they are paying it, because the broker does not deduct a separate line item from the balance the way commission does.
Can I Get Any of the Forex Spread Back?
Partly, through a rebate programme. The broker pays an introducing-broker commission out of the spread and commission your trading generates, and a rebate service returns a share of it to you per lot. It does not lower the quoted spread itself — it refunds part of what you already paid, which is why it matters most to high-volume traders.
How Do I Check a Broker’s Real Spread Before Depositing?
Open a Demo account of the same type you intend to fund, enable the Spread column in the MT4/MT5 Market Watch, then log the spread across different hours — the Asian session, London, the London–New York overlap, and the moment news prints. Compare the average you measured against the advertised figure, not against the floor.
